FILING APPLICATION BY FINANCIAL CREDITOR UNDER IBC
In this write up we will discuss the provisions with regard to Filing Application by Financial Creditor under IBC in the easiest manner. Let’s understand:
WHO IS FINANCIAL CREDITOR
Provisions with regard to Financial creditors are contained in IBC Code and refer to a person to whom any financial debt is being owed and it also includes a person to whom any of such debt been assigned or transferred.
HOW TO FILE AN APPLICATION BEFORE NATIONAL COMPANY LAW TRIBUNAL
The provisions with regard to the filing of an application by the financial creditor are stated under section 7 of “The Insolvency and Bankruptcy Code, 2016“(“IBC”).
UNDERSTANDING THE PROVISION OF SECTION 7 IE., INTIMATION OF CORPORATE INSOLVENCY PROCESS
It is provided that a financial creditor can himself or jointly with any other Financial creditor may file the Application to initiate the Corporate Insolvency process (“Insolvency process”) against any Corporate Debtor who made any default in payment of dues. The Application is to be filed before the Adjudicating Authority.
The Financial creditor is required to file the Application in form as may be prescribed by the Authority and shall accompany the fees stated under the Act.
It is to be noted that while filing an application with the adjudicating Authority, the below document shall also be submitted:
a). Any record of default which is being made by the corporate debtor.
b). Details of Resolution professional proposed to act as an interim resolution professional.
(c) any other information as may be asked.
Thereafter the Authority will within a period of 14 days from the date of receipt of the Application shall ascertain the existence of the default being made by the corporate debtor. It shall be done after pursuance of the documents and/or information being submitted by the Financial creditors.
Adjudicating Authority after pursuing the documents/information as provided, shall either admit or reject the Application submitted by the Financial creditor. The Application may be rejected due to 2 reasons one is that the Application submitted is not complete in all respect or there is any disciplinary proceeding pending against the Insolvency resolution professional.
However, it is to be noted that before rejecting any application of the Financial creditor, a notice for rectification shall be provided by the Authority to the financial creditors and the same shall be removed by the financial creditors within a period of 7 days.
Once the Application is being admitted by the adjudicating Authority the Corporate insolvency resolution process shall be commenced. The Adjudicating Authority shall communicate about the commencement of the corporate insolvency resolution process to the Financial Creditors as well as to the corporate debtor.
POINTS TO BE KEPT IN MIND WHILE FILING AN APPLICATION WITH THE ADJUDICATING AUTHORITY
- The monetary value of default should more than or equal to 1 Lakhs rupees.
- The Application to commence Corporate insolvency resolution process shall be filed in Form 1.
- Along with the Application, a demand draft of INR 25000/- shall be submitted, the same shall be prepared in favor of Pay and Accounts Officer, Ministry of Corporate Affairs,” and shall be payable at Delhi.
- The financial creditor shall provide the name of ‘Interim Resolution Professional while filing of Application under IBC code.
- Once the application is being accepted by the Adjudicating Authority the same shall be communicated to both parties ie., Financial creditor and Corporate debtor and once submitted proceeding with regard to insolvency resolution shall be started.
SUPPORTING DOCUMENTS TO BE FILED ALONG WITH THE APPLICATION
- Application for resolution process shall be filed in FORM 1.
- Demand draft of an amount as discussed above.
- Consent to be taken from the Insolvency resolution professional and shall be submitted in the adjudicating Authority. The format has been provided under the Code.
- Affidavits in form as prescribed under the Code.
- Other documents to prove a claim.
TIME FRAME INVOLVED IN THE CORPORATE RESOLUTION PROCESS
As per the wording the Act, the Corporate insolvency resolution process be completed within a period of 180 days from the date of commencement of the insolvency process. However, a one-time extension of 90 days can be provided.
Click more information- RECOVERY OF MONEY THROUGH IBC LAWS
DECLARATION BY NCLT
Once the NCLT admits the Application, it will do before things
- It will declare a moratorium ie., temporary stoppage of activities being carried out.
- Appointment of Interim resolution professional having requisite qualification and knowledge.
- Publication in the newspaper.
The moratorium has been defined under Section 14 of the Code:
Declaration of Moratorium is being made in order to restrict the following activities:
- Filing of any suit or proceeding against the Corporate Debtor including the execution of any judgment being passed in any court
- Any proceeding under SARFAESI Act 2002
- Disposing of any asset or any right or interest of Corporate Debtor
- It is pertinent to mention here that any routine transaction like the supply of goods and/services shall not be affected during this period.
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